Visa

Visa is an interesting study case of what is a good business and what would one should pay. Below are the market cap, free cash flows, yields and returns since its IPO. After all, all a company is worth is its free cash flow and what you should pay for an adequate return.

IPO 2008 Market Cap:17.9b FCF(2009):252mm FCF/MC yield: 1.4% CAGR to 2024: 23.60% (30x in 16yrs)

2010 Market Cap: 44.25b FCF: 2.543b FCF/MC yield: 5.75% CAGR to 2024: 19.42% (10x in 13yrs)

2015 Market Cap: 132.75b FCF: 6.18b FCF/MC yield: 4.66% CAGR to 2024: 16.67% (5x in 9yrs)

2019 Market Cap: 249b FCF: 12b FCF/MC yield: 4.81% CAGR to 2024: 16.35% (2.13x in 5 yrs)

2023 Market Cap: 531b  FCF: 19.69b FCF/MC yield: 3.71% 

The gross margins of 98% and net income margin at 50% is insane. There can't be a better business from that standpoint although Bezo's quote of "your margin is my opportunity" comes into play. Why can't fin-tech "disrupt" the networks of Visa and Mastercard. The price now does seem rich, but it has still managed to compound like crazy since its IPO. I am not sure I am smart enough to recognize how dominant of a buiness it is before its price has exploded. I am not sure I can justify my stupidity without the margin of safety as implied by the fcf yields of the past. Maybe in 2010, that 5.75% FCF/MC yield was on the fringe as it was probably growing like crazy, but the Treasurys were also higher back then a decade ago. Buiness, free cash flow, and pricing are three things I should focus on and the returns will come.